Our Insights

We hear the term “new normal” everywhere these days. And with good reason. But how will this new normal filter across the real estate market moving forward? What is the “next normal?” At this point, it is a question with challenging answers because so many important variables remain uncertain. Is COVID-19 waning, or are we still in round one of this fight? Will there be a round two? If

Real estate investors routinely ask me the same question over and over: “what should I be wary of when looking at DST real estate investments?” My answer is always the same: beware of high cash flow!

“Location, location, location” is the mantra we all know in real estate. But we can add an addendum to that: Growth, growth, growth.

Many real estate investors choose to invest in triple net leased (NNN) properties because they are, for the most part, management-free. While the desire to get out of management is understandable, especially for real estate investors that have worked hard managing their properties for decades and now want to enjoy the fruits of their labors, investing in single-tenant NNN properties brings a variety of risks that many investors fail to consider.  

In 2020, California voters will get a chance to decide whether to change Prop. 13, the landmark 1978 Ballot Measure that capped California property taxes. For more than 40 years, Prop. 13 has been deemed sacrosanct. No one could touch it or change it. And for good reason. 

One of the questions I am frequently asked by real estate investors is how financing works with Delaware Statutory Trust (DST) properties acquired through a 1031 exchange. We often only think of 1031s in terms of their simplest definition as a like-kind exchange, swapping property for property.

Based on my personal experience with both buying and selling local properties, and my obsession with the economics behind real estate values, the slow downward price trend forecasted by Bruce Norris and The Norris Group is coming to fruition in most areas of Orange County. Homes sales (activity) has been trending downward since the beginning of 2018.

Current tax laws make the Delaware Statutory Trust (DST) the preferred structure to purchase management-free real estate through a 1031 Exchange. Real estate investors looking to get out of management and still maintain the tax deferral benefits of a 1031 should consider DSTs.

Through a 1031 exchange, an opportunity exists to transition your real-estate holdings out of places now experiencing a negative net-migration and into properties in states where populations and job-growth are expanding. By paring a 1031 exchange with a business trust structured property, you can do so without any more management involved.

Prop 13 was born out of good intention: to keep aging Californians from losing the family home to tax payments they could no longer afford simply because their property values were escalating at an impossible pace in the 1960s and 1970s. The problem is that lawmakers back in the day tossed every piece of California property into the same bucket.